FICO arms lenders with assorted deal offers in seconds

Lenders on FICO's new platform can provide dealers with multiple offers from the get-go, potentially eliminating the back and forth with dealers to achieve a customer's perfect deal structure, the company said last week.

FICO's Alternative Deal Structures platform, designed specifically for automotive, works within lenders' parameters and customers' preferences to quickly produce multiple deal structure options at the point of sale, the company said.

"If you look at a typical auto finance scenario today, you might get a single deal structure offered by the underwriter [or] by the dealer, and the customer may or may not like it. If they don't like it or something unusual comes up, they have to go through the whole rehash process," Ken Kertz, senior director of FICO's auto practice, told Automotive News. "It takes hours and kind of tortures the customer in the dealership office. And what we're able to do is come up with a number of multiple deal structures in real time [and] optimize those real deal structures so that ultimately, the credit analyst can pass along the best three or four deal structures to the F&I manager, and the F&I manager can then pass on the best offer to the customer."

A conversation with the customer doesn't happen for auto lenders as it does with other banking products, said Matt Stanley, analytic segment leader at FICO. Lenders don't get the chance to ask the customer, for example, "You asked for a 60-month, but I can put you into a 72-month and your monthly payment would go down by 40 bucks," Stanley said.

"We think we have cracked a nut here," he said, in opening the possibility for a lender to receive an application from a customer and expand the conversation.

FICO is working with four of the largest indirect auto lenders. Some are captives, and some aren't, Kertz said, adding that confidentiality agreements precluded him from naming them.

FICO develops the offers within the lenders' parameters in less than a minute, Stanley said. "Auto lenders have a credit policy or a buy box. We search within that space to identify what the lender is comfortable with, rather than asking them to go outside of their buy box," he said.

The offer also factors in valuation estimates and looks at how various offers affect the projected residual value factor, loss estimations and profit estimations.

Lenders on the Alternative Deal Structures platform "can discover thousands or possibly millions of offer alternatives to deliver the most appropriate offers to dealers and customers," Anil Goyal, senior vice president for automotive valuation and analytics at Black Book, said in a statement. "This solution allows for the integration of vehicle values and depreciation rate forecasts to enable lenders to estimate accurate loss projections and overall profitability while delivering the ultimate in choice to customers."

But if a deal ever has to be rehashed, Stanley said, it will be a shorter conversation.